FPA members to offer free advice
Financial Planning Association (FPA) members will provide one free interview to victims of defaulting solicitors’ mortgage schemes.
The FPA made the offer to refer consumers to advisers through its 1800 number after the Australian Securities and Investments Commission (ASIC) announced a major investigation into the schemes which it says may have cost Australian investors more than $300 million in lost funds.
The investment watchdog says the investigation will focus on so-called "runout" mortgage schemes which are being managed by solicitors and finance brokers. Runout schemes are those which did not make the transition to ASIC's tougher managed investments regulatory regime in 1999 under the Managed Investment Act (MIA).
ASIC chairman David Knott says the probe is "the biggest enquiry of this type ever undertaken by ASIC".
Knott says more than one third of the $1 billion involved in the schemes is now in default.
"We don't yet have all the data, but what we know already is that more than $1 billion is involved in these schemes, and the alarming information is that about a third of that, over $300 million is in default," Knott told the Nine Network's Business Sunday program.
Knott says the inquiry may result in criminal prosecutions.
"Our primary focus at this stage is to see what we can do to help protect investors," he says.
"But part of the investigation will certainly be to look at misconduct, whether it's negligence or criminal, and if we find evidence to sustain a prosecution of that type we will take it."
The schemes had a two-year wind up period ending October 31, 2000, under the supervision of Law Societies in Queensland, NSW, Victoria and Tasmania. The Finance Brokers Institute of South Australia Inc was responsible in South Australia, while a small number of schemes in West Australia were given the same deadline.
ASIC will now establish a national database on the funds and target the most high-risk schemes.
"It is not realistic to expect that investor losses will be recovered, but our intervention should provide opportunity to minimise these losses and maximise consumer redress," Knott says.
It expects to complete the first phase by June 30, 2001, but said the project would extend through the second half of the year.
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